Homebuyers with good credit can expect to pay more for their mortgages because of a policy that went into effect Monday, which is aimed at subsidizing high-risk borrowers, say critics of the rule.
Jeff Wallack, a Sheridan real estate agent and radio show host, told Cowboy State Daily the fees will ultimately punish people for having good credit when they go to buy a home.
“I think it’s absolutely outrageous,” he said.
By The Rules
The Washington Times reported that, as a result of the fee changes, home loans on a $400,000 home will cost $40 more per month for homebuyers with credit scores 680 or higher. Borrowers with a down payment of 15% to 20% of the home price also will be dinged with higher fees.
The policy is part of the Federal Housing Finance Agency’s (FHFA) affordable housing initiative.
Wyoming Treasurer Curt Meier is among 34 state treasurers and financial officials across the country who signed a letter Monday criticizing President Joe Biden and Sandra Thompson, director of the Federal Housing Financing Agency, for the fees.
“The policy will take money away from the people who played by the rules and did things right – including millions of hardworking, middle-class Americans who built a good credit score and saved enough to make a strong down payment,” the letter states.
The Big Problem
Meier told Cowboy State Daily that the program fails to address the reasons why the cost of buying a home is out of reach for more Americans.
He said that normally in the housing market, there’s a rotation in which first-time homebuyers advance in their careers over time and are able to buy larger homes. When they move out of their first homes, it creates opportunities for a new set of first-time homebuyers.
With inflation driving up the cost of new homes, people aren’t rotating out of their first homes.
“And therein lies the big problem where the number of affordable houses that are of any quality is pretty low,” Meier said.
The Right Tool
Meier, who is on the board of the Wyoming Community Development Authority (WCDA), said the authority is building affordable housing through the Community Development Block Grant program or through tax credits to contractors building the housing.
“We’ve got a number of programs that go directly to the income, not the credit rating. They go to the ability of people to actually pay, not based on their credit scores so much, but what they actually make,” Meier said.
He said the FHFA program is the wrong tool to fix the problem and will create more problems without addressing the housing issues.
“It’s kind of like trying to dig a post hole with a hammer,” Meier said.
Backwards Incentives
The letter calls the policy “one of the most backward incentives imaginable.”
According to the letter, the fees will be used to hand out better mortgage rates to people with lower credit ratings and who have saved less money for down payments on their homes.
The letter criticizes the federal government for trying to solve the affordable housing problem by penalizing “hardworking, middle-class Americans by confiscating their money and using it as a handout.”
Thompson issued a statement last week claiming that the high-credit borrowers would not be charged more so that lower-credit borrowers would pay less.
“Many borrowers with high credit scores or large down payments will see their fees decrease or remain flat,” Thompson said in the statement.
Financial officials in 34 states disagree, according to their letter.
“For decades, Americans have been told that they will be rewarded for saving their money and building a good credit score. This policy turns that time-tested principle upside down,” they wrote.
The letter states that the FHFA’s policy amounts to a middle-class tax hike and urges “immediate action to end this unconscionable policy.”
Slowing Market
Wallack said that the new fees are coming down at a time when the real estate market is struggling with inflation, recession worries and higher interest rates.
“It’s going to stop people from getting new mortgages and buying homes. It’s going to have a negative impact all around,” Wallack said.
Darin Smith, former congressional candidate and notable Wyoming Republican, said the mortgage fees are working on the same principles as the push to cancel student loan debt, which makes people who pay off their loans or didn’t take out student loans pay for those who did.
“Marxist policies have consequences. It’s penalizing those who did things right. It’s a form of wealth distribution,” Smith said.
Roots In Marxism
Sen. Anthony Bouchard, R-Cheyenne, compared the new fees to the Obama-era Affordable Care Act, which was promised to lower health care premiums.
Bouchard said the law had people subsidizing those who couldn’t afford health insurance, which wasn’t the purpose of health insurance.
In the same way, he said the FHFA policy is turning mortgages into a subsidy mechanism, and it will undermine the incentive to save for down payments and keep credit scores high to lower interest rates.
“It all has its roots in Marxism. There are no incentives to have businesses, to have farms, to be productive citizens. What you have is an administration following that same blueprint,” Bouchard said.
Contact Kevin Killough at Kevin@CowboyStateDaily.com.
